What Buyer’s should know about Broker referrals…
Ask any Broker about referring Lenders, Home Inspectors or Contractors to their buyer clients and you’ll get a wide range of answers from referring several for each trade, referring just their most trusted individual to not referring anyone at all. The one common thread among those three points of view is the Broker’s concern for his/her liability. Of course, the buyer simply wants to hire someone with expertise to help them obtain a loan, inspect a house or make repairs so, should the Broker’s issues with liability be a concern for the buyer ? Unfortunately, the answer is yes but, how your Broker deals with walking the fine line between being a resource for all your needs and protecting his/her liability will determine whether you’ll have a good working relationship and be able to accomplish your goals. This is certainly a question you can pose to any Broker you may be considering to work as your Buyer’s Agent before hiring them.
Why should a Buyer be concerned with the Broker’s potential liability…the short answer is because in an Agency relationship your Broker’s liability could become your liability. You’ve hired someone to represent you thus, what they say and do in that capacity may have unintended consequences for you. Regardless of which point of view a Broker takes in regards to providing referrals or not, if they’ve made that decision with the intent to protect all involved from the harm of potential liability then they have served their clients well. Of course, there still is that fine line between potential liability and providing a buyer with high quality service.
In 20 + years I’ve observed Broker’s not only practice one of the three above referenced points of view in regards to referrals but, some pretty unique defenses of those positions as well. It’s common place to hear Broker’s say they always refer “3” of every trade but, all too often it’s followed with some sort of disclaimer that they’ve now cleansed themselves of any liability by doing so. There is also a saying that goes “your only as good as the last name on that list” thus, the client still got the names from the Broker so, if one goes bad then who is to blame, the buyer for making a bad selection or the Broker for providing the names ? In many cases the buyer’s are glad to have three names from which to choose and things go just fine however, there are buyer’s who require more pinpoint direction and that means being guided to the sole individual expert who’ll solve their issue. To this type of buyer, 3 names may be looked upon like handing them the yellow pages and wishing them good luck & that leads us to Broker’s who proudly state their “no referrals” policy. I try to put myself in my clients shoes whenever possible and I can’t imagine how stressful it would be to be left on your own to trust a total stranger to take you thru a crucial point in a transaction. Needless to say, I’m not in the camp with either of those Broker’s who would provide multiple names or leave you on your own. I just closed a transaction wherein my buyer’s & I encountered a seller who had just went thru a sale fail that included making repairs to his roof which were improperly done…it factored in that deal terminating, as well as being an issue when our inspector called out the improper repairs a second time. This was a situation wherein the seller simply searched on his own to locate a roofer & unfortunately, it didn’t fare well. Having had the rare opportunity to meet the seller in person, I was taken back by his obvious embarrassment for what had happened previously. It’s a situation such as this that confirms my belief that I will continue to provide only the most trusted individual lenders, inspectors & contractors to my clients. Brokers are only permitted to share referral fees with other Brokers, not lenders, Home inspectors or contractors thus there are no financial incentives, other than providing a valuable resource to the client. I constantly review records & information on all trade referrals to ensure that anyone I refer to a client would be the same individual I would trust in my own home.
Although most Real Estate Broker’s are not experts on home inspections or construction we do have an obligation to our clients to have sufficient knowledge to address issues related to buying & selling property, including providing information that may require more advanced expertise from Attorneys, CPA’s or Contractors etc. It would be very difficult, if not impossible, to understand when those ‘next steps’ are required if a Broker essentially removes him/herself from a transaction by not taking part in all the issues that effect a client, such as when & who to hire in addition to the Broker.
What you should know about the Rental market…
Whether you own rental property or not it’s current State of the Union may effect your personal financial situation and if not now, perhaps down the road so, keeping abreast of the rental market is as important as watching your 401-K. If you own rental property your probably glad you do as rents have increased 6.5% so far in 2014. 78% of leases in 2013-14 were renewed and 75% of those saw increases. If your one of the 25% of renters who renewed without an increase, good for you ! There certainly isn’t anything wrong with renting or more importantly living within your means…after all, living above ones means started this mess in the first place. Home ownership is currently at it’s lowest level (64.8%) since 1995, the same year that the Community Reinvestment Act made regulatory changes that required lending institutions to make loans that might otherwise not have been made thus, by 2004 home ownership was at it’s peak.
With home ownership declining the rental market has seen record increases, in fact Portland is #5 Nationwide with a 2.2% vacancy rate thus, it’s no wonder that 60% of the Foreclosed homes State wide became rentals in 2013. Unlike just a few short years ago, it may be possible for those who are having difficulties meeting their note payments to rent out their homes and stay above water. For those of you who may be considering rental property as a part of your overall portfolio I would be glad to answer any questions you may have. The market for multifamily properties, particularly commercial (5 units +) is fierce so, it does take some patience. Regardless of whether the Real Estate market is on an upward spiral or decline there is typically something that can help you either increase your position or maintain what you have if you have the right information & guidance along the way.